Dive Brief:

• A judge in a Northern District of California court this week denied former View CFO Vidul Prakash’s motion to dismiss a Securities and Exchange Commission complaint against him, which alleges the ex-finance chief failed to disclose more than $20 million in liabilities.   
• The SEC’s complaint, filed in July, claims the former CFO acted negligently by failing to include the costs of shipping and installment as well as manufacturing new windows to address a particular defect. Prakash’s motion to dismiss the charges argues that the SEC’s assertion that he did not ensure View’s liability team considered those costs “is merely an allegation of error rather than negligence,” according to the Feb. 26 court filing.   
• California District court Judge Beth Labson Freeman was not convinced, stating the SEC had “adequately alleged facts” that enable the court to reasonably infer Prakash acted negligently and denied to dismiss the case.

Dive Insight:

The SEC lodged its complaint against the former finance chief last July, after settling charges with the Milpitas, California-based company for failing to disclose $28 million in warranty liabilities which related to a particular defect in its windows, CFO Dive previously reported. The company offers smart window products that utilize artificial intelligence to help control factors such as temperature and glare, according to its website.

In the complaint, the SEC alleges the ex-CFO had violated securities law and asks for permanent injunctions, civil penalties, and a bar against Prakash from serving as a director or officer. Freeman also denied Prakash’s request to dismiss the SEC’s request for that officer or director bar, according to the filing.

Prakash resigned from his role as finance chief in November 2021 in connection with an internal investigation by View’s audit committee which concluded its liabilities had been misstated for the periods highlighted by the SEC — including fiscal years fiscal years 2019, 2020 and the first quarter of 2021, according to the July complaint.

While the smart window manufacturer did disclose warranty liabilities between $22 million to $25 million relating to the costs of manufacturing new windows to address a defect, it did not include costs of shipping or installation for those new windows, which View had decided to cover. With such expenses included, View should have disclosed warranty liabilities between $48 million and $53 million, the SEC said.

As finance chief, Prakash “knew or should have known that View had decided to cover Installation Costs and View’s projected Installation Costs were probable, could be reasonably estimated, and exceeded $20 million,” according to the Feb. 26 court filing. The SEC declined to bring civil penalties against View as it had taken remedial measures and self-reported the fraud, it said in the July announcement.

The smart window manufacturer itself is still facing significant financial challenges. The company, which reached unicorn status in 2018 after a $1.1 billion investment from Softbank’s Vision Fund, went public via a special purpose acquisition merger in 2021 and has struggled to gain ground since that point.

Allegations of fraud relating to its liability disclosures dismayed investors, contributing to wobbling stock prices. Meanwhile, the company has scrambled to reduce costs and bank its cash burn as it faces a crisis in liquidity that puts its future operations in doubt; following a $50 million influx of funds last year by several investors, the company believes its cash and cash equivalents will be “sufficient to fund its anticipated operating costs and obligations into, but not beyond, the first quarter of 2024,” it said in its Q3 2023 earnings release published in November.

View is racing against that clock as it also deals with a shift in financial leadership; the company appointed Thomas King, an alum of American Virtual Cloud Technologies, to serve as interim CFO effective Feb. 21, according to a SEC filing. The move follows the departure of former finance chief Amy Reeves, who announced in January she would be  resigning from the position effective Feb. 1, CFO Dive previously reported.

A SEC spokesperson declined to comment beyond the details included in the filings.View did not immediately respond to requests for comment.